Newsroom

June 13, 2017

FASB reviews CECL, credit card receivables during NAFCU-attended meeting

A Financial Accounting Standards Board meeting yesterday, attended by NAFCU, addressed possible issues that may arise when organization implement the "current expected credit loss" accounting standard and discussed acceptable methods for determining the estimated life of a credit card receivable.

NAFCU Regulatory Affairs Counsel Ann Kossachev attended yesterday's FASB's Transition Resource Group meeting. Doug Wright, chief financial officer at Mission Federal Credit Union, a NAFCU member and member of the TRG, was also in attendance at Monday's meeting.

During the meeting, the TRG discussed five issues:

  • discounting expected cash flows at the effective interest rate;
  • the scope of purchased financial assets with credit deterioration (PCD assets) for beneficial interests;
  • transition guidance for transitioning pools of purchased credit impaired (PCI) assets to PCD assets;
  • accounting for troubled debt restructurings (TDBs); and
  • acceptable methods for determining the estimated life of a credit card receivable.

On the final item, which is of significance to credit unions, the TRG debated the merits of two different views about how to determine the "estimated life" of a credit card receivable for assessing credit losses under the FASB guidance. Both views apply the CARD (Credit Card Accountability Responsibility and Disclosure) Act, but under the second view, projected future cardholder draws should be considered in applying forecasted expectation payments. Several of the TRG members questioned whether this second view should even be allowed because it appears to be inconsistent with the CECL standard.

No amendments were adopted during the meeting, but FASB will continue its evaluation of the discussion.

A Treasury Department report released Monday includes a NAFCU-applauded recommendation for a review of the CECL accounting standard.